What Is Pharmaceutical Fraud?

What Is Pharmaceutical Fraud?

Pharmaceutical companies make enormous profits for making drugs. According to research by the Mayo Clinic, nearly 70% of Americans are taking at least one prescription drug. With an industry this large, issues are bound to appear.

Pharmaceutical fraud includes activities which lead to false claims being submitted to federal insurers, such as Medicare, or state Medicaid programs. There are various schemes listed as violations in the Federal and State False Claims Acts. These include:

Off-Label Marketing

Prior to any drug’s approval for use, it has to first be approved by the Food and Drug Administration (FDA). The FDA specifies which conditions can be treated by a certain drug. This is known as the “label” of the drug. Pharmaceutical companies are bound by this label and cannot market the drug for uses not listed in the FDA approval. Still, doctors are free to prescribe drugs to treat medical conditions as they see fit, even if a specific drug has not been approved by the FDA to treat that condition. This is known as “off-label” use. Pharmaceutical companies use this loophole and market the drugs to doctors for off-label use – directly violating the False Claims Act.

Best Price Fraud

Selling drugs to the Medicaid state program includes the agreement of charging the lowest price amongst offers to other drug wholesaler, insurers, pharmacists and business. Sometimes pharmaceutical companies will offer their drugs at a lower cost to other customers, in order to ensure their drugs are prescribed more often. These discounts are usually concealed from the Government, as the violation of the Medicaid Best Price is punishable under the False Claims Act.

Illegal Kickbacks

Pharmaceutical companies sometimes lobby for their product’s use, by providing certain rewards to medical professionals, including doctors. This is done to boost profits. Offering cash, gifts, vacations, sponsored retreats or anything of the similar nature to doctors is fraud subject to the Federal Anti-Kickback statute.

These are just some of the most common schemes used by pharmaceutical companies. Whistleblower cases have proven to be an effective way of fighting against pharmaceutical fraud.

According to reports, over $19 billion has been charged to different companies for violations of the Federal and State False Claims Act and the Federal Anti-Kickback Statute. The top twenty largest lawsuits filed under the False Claims Act which have been settled are related to healthcare. The biggest whistleblower settlement in the US cost the pharmaceutical giant Pfizer $2.3 billion in September of 2009.


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